Story perspectives

Japan to Slash Food Tax to 1% — 10 trillion Yen Gap

8/7/2026

Summary

Takaichi Slashes Food Tax

Prime Minister Sanae Takaichi announced Japan's food tax will drop from 8% to 1% in April 2027.
The cut will give low- and middle-income households about 600 billion yen annually.
Officials say it will cause a 10 trillion-yen (?$63 billion) annual revenue shortfall.
Takaichi pledged to restore the tax and fund the loss without bonds, despite opposition from ministers Taro Kono and Gen Nakatani and scholars' warning of higher bond yields and a weaker yen.

Summary

BOJ Holds Rate

The Bank of Japan kept its policy rate at 1% in July, despite June hikes to a three-decade high.
U.S. officials warned further yen-supporting intervention may depend on Japan allowing the BOJ to tighten monetary policy.
Opposition parties accuse the government of using the BOJ to absorb fiscal pressure from the food-tax cut.

History

Historical Context

Japan first tried a consumption tax in 1979 under LDP Prime Minister Masayoshi Ohira, but it failed. The tax was finally introduced at 3% in 1989 by Prime Minister Noboru Takeshita and raised to 5% in April 1997 under Ryutaro Hashimoto, a move blamed for a recession. Subsequent governments repeatedly debated further hikes, leading to an 8% rate in 2014 and 10% in 2015.

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Takaichi Slashes Food Tax

Prime Minister Sanae Takaichi announced Japan's food tax will drop from 8% to 1% in April 2027.
The cut will give low- and middle-income households about 600 billion yen annually.
Officials say it will cause a 10 trillion-yen (?$63 billion) annual revenue shortfall.
Takaichi pledged to restore the tax and fund the loss without bonds, despite opposition from ministers Taro Kono and Gen Nakatani and scholars' warning of higher bond yields and a weaker yen.

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